In New Year, Christie Administration Faces Critical Decisions on Energy and Environment

Over the next few months the administration will address renewables, ratepayer subsidies and gas-fired power plants -- and face a potential showdown over the future of the New Jersey Highlands.

As the Christie administration enters its second year, it faces crucial decisions that could determine how New Jersey supplies electricity to homes and businesses and at what cost, factors some concede vital to recovery of the state’s economy and prospects for future job growth.

In its first year, the administration revisited several of the key initiatives of the Corzine administration, most notably the Energy Master Plan, which establishes very ambitious goals to increase the state’s reliance on renewable energy, such as solar and wind power. It also sharply reduces energy consumption to meet New Jersey’s energy needs.

Its decisions on the plan, particularly as it affects the state’s solar sector, could significantly reshape the industry. To date it has been growing fast because of considerable subsidies from ratepayers and what solar proponents argue are some of the most forward-looking policies in the nation.

Meanwhile, both the state legislature and New Jersey Board of Public Utilities (BPU) are working to increase power supplies from more traditional sources, such as natural gas. This is a high priority because New Jersey electric rates are among the highest in the nation, by virtue of the fact that the state transmission system is very congested, which drives up prices consumers pay for electricity.

The Governor also has taken aim at the law aimed at protecting the New Jersey Highlands, the source of drinking water for much of the northern portion of the state. His slate of proposed appointments to the Highlands Commission have come under intense opposition from most of the state’s environmental community. Democrats, who control the Senate, may block the nominees.

Here is a brief analysis of what to expect in the coming months:

Energy Master Plan

Administration officials have sent mixed signals on how much they plan to revamp the plan, which, at the time, marked the first revision of the state’s energy policies in more than a decade. In a break from the past, the current plan envisions renewable energy and energy efficiency as the top priorities in meeting future energy demand, a goal strongly supported by environmentalists and clean energy advocates. The cost, however, has worried some. Last year, the BPU released an analysis of what drives up electric bills in the state. It found more than a quarter of the costs of a typical residential electrical bill are driven by state policies, a fact that is causing regulatory officials to question whether all of those programs are necessary.

Look for the administration to ratchet back some of those policies, particularly the societal benefits charge (SBC), which helps fund clean energy programs through a surcharge on customers’ gas and electric bills. The administration may also decide to bolt from a regional initiative aimed at curbing emission of greenhouse gases, which contribute to global warming. The new plan also is likely to be more pro-nuclear than what the Corzine administration promulgated, even with the decision by Christie officials to close down the Oyster Creek nuclear generating station in nine years.

Whither Solar?

Few sectors have enjoyed the growth of the solar industry in New Jersey during the past decade. Fueled by subsidies, it helped New Jersey vault to second behind only California in the number of solar installations. Early last year, the legislature passed a bill that set even more aggressive solar goals than those in the energy master plan. If achieved, it would have solar systems generating enough electricity to roughly match the output of five nuclear plants.

Still, there are critics who say it is time for the solar industry to thrive without such subsidies. BPU President Lee Solomon has repeatedly questioned how the state can drive down the price of solar renewable energy certificates (SRECs), which are given to owners of solar systems for the electricity they generate. As one administration official said, “It is time for solar to walk on its own.’’

Offshore Wind

Within the next three months, the state should come out with its detailed regulatory plan for promoting the development of offshore wind farms. Four developers are vying to build wind facilities off the coast of New Jersey, which could lead to more than 1,100 megawatts of offshore wind generation. The BPU is drafting the rules under which they would be eligible for offshore renewable energy certificates (ORECs), similar to those that solar systems earn. The big unknown is how much those certificates will be worth and what kind of economic benefits will result if those wind farms are built. In the short term, however, there will be no question those facilities will increase energy bills for consumers.

Building New Power Plants

Late last year, the BPU said it would hold hearings early in 2011 on how to build new so-called baseload generation in New Jersey. Baseload plants generally run 24 hours, seven days a week. No new baseload plants have been built in the state since it restructured the electric industry in 1999, a factor that has driven up prices for everyone. The legislature is considering a bill that would guarantee ratepayer payments to a build new gas-fired power plant, but that measure is controversial because it is viewed as a sweetheart deal for one developer by some. Few argue new power plants are needed in the state, but consumer advocates question why incentives are needed to build them, arguing a better strategy would be to undertake more aggressive steps to reduce energy consumption. Public Service Enterprise Group is weighing whether to add to its three nuclear generating stations in South Jersey, but do not expect it to move forward unless it, too, wrangles some kind of long-term power deal with the state.

Highlands

In announcing a list of seven proposed appointments to the Highlands Commission, Gov. Chris Christie vowed to bring a "more commonsense approach application to the Highlands Act." The appointments infuriated the environmental community, however, since most of the nominees have in the past been critical of the Highlands Act, which was passed during the McGreevey administration as a way of protecting the watershed lands providing drinking water to more than 5 million people. Christie's nominees also fail to include anyone from Bergen Co., which is the most populous county and is reliant on the Highlands for its drinking water. This promises to be a fight that plays out in November with the governor already urging voters to elect Republicans who will be the only ones willing to look at whether the Highlands law needs to be changed.